Kumar Consumer Services Ltd., Baroda V. The Income tax Officer,Ward-1(2), Baroda

ITA 2950/AHD/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1681 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 09-05-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 29-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Unexplained cash credit; Unexplained expenditure; Loose papers; Corroborative evidences
• Section: 69C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 2950/AHD/2010 (ASSESSMENT YEAR: 2002-03) KUMAR CONSUMERS SERVICES LTD., GF/54, AVISHKAR COMPLEX, OLD PADRA ROAD, BARODA V/S INCOME TAX OFFICER, WARD- 1 (2), BARODA (APPELLANT) (RESPONDENT) PAN: AABCK6114D APPELLANT BY : SHRI MUKUND BAKSHI, AR RESPONDENT BY : SMT. SONIA KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 09 -05-201 6 DATE OF PRONOUNCEMENT : 12 -05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A)-IV, BARODA DATED 10.08.2010 PERTAINING TO A. Y. 2002-03. 2. THE GRIEVANCE OF THE ASSESSEE READ AS UNDER:- ITA NO. 2950 /AHD/2010 . A.Y. 2002- 03 2 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) -IV, BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 7,00,000/- OUT OF THE TOTAL DISALLOWANCE OF RS. 25,78,657/- MADE BY THE LD. A.O. OUT OF THE INCENTIVE PAYMENT MADE OF RS. 39.71 LAKHS. THE D ISALLOWANCE OF RS. 7,00,000/- BEING CONTRARY TO THE FACTS AND BAD IN L AW IS PRAYED TO BE ALLOWED. 2. THE LD, COMMISSIONER OF INCOME TAX (APPEALS)-IV, BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ADDITION OF R S. 40,000/- ON THE GROUND THAT THE APPELLANT COULD NOT FURNISH THE CONFIRMATI ON, OUT THE TOTAL ADDITION MADE BY THE LD. A.O. OF RS. 12,61,251/- CONSIDERING IT TO BE UNEXPLAINED CASH CREDIT AND INVOKING THE PROVISION OF SECTION 6 8 OF THE ACT. THE ADDITION OF RS. 40,000/- BEING CONTRARY TO FACTS AND BAD IN LAW IS PRAYED TO BE DELETED. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- IV, BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ADDITION OF AN A MOUNT OF RS. 4,800/- BEING INTEREST @ 12% ON THE ADDITION OF RS. 40,000/- AS A BOVE, BEING THE ALLEGED UNEXPLAINED CASH CREDIT. THE ADDITION RS. 4,800/-BE ING CONTRARY TO FACTS AND BAD IN LAW IS PRAYED TO BE DELETED. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- IV, BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD . A.O. IN MAKING ADDITION OF AN AMOUNT RS. 1,11,000/- ON THE BASIS OF NOTING MAD E ON PAGE NO. 32 AND 33 OF THE ANNEXURE -A-13 PERTAINING TO PAYMENT MADE TO COX AND KINGS (I) LTD. FOR FOREIGN TRAVELING. THE ADDITION OF RS. 1,1 1,000/- BEING CONTRARY TO FACTS AND BAD IN LAW IS PRAYED TO BE DELETED. 5. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- IV, BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE FICTION OF THE L D. A.O. IN MAKING AN ADDITION OF RS. 1,02,620/- ON THE BASIS OF BLANK PAYMENT VOU CHERS IMPOUNDED. THE ADDITION OF RS. 1,02,620/- MADE IS IN COMPLETE DISR EGARD OF THE AVAILABLE FACTS AND THEREFORE, IS PRAYED TO BE DELETED. 6. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) -IV, BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD . A.O. IN MAKING AN ADDITION RS.1,40,815/- ON THE BASIS OF NOTING MADE ON PAGE N O. 10 TO 14 OF THE ANNEXURE -A-14 PERTAINS TO PAYMENT MADE FOR PURCHAS E OF FURNITURE AND ITA NO. 2950 /AHD/2010 . A.Y. 2002- 03 3 POLISHING OF FURNITURE AND STATEMENT RECORDED DURIN G THE COURSE OF SURVEY PROCEEDINGS. THE DISALLOWANCE OF RS. 1,40,815/- MAD E BY THE LD. A.O. IS IN COMPLETE DISREGARD OF AVAILABLE FACTS AND THEREFORE , IS PRAYED TO BE DELETED. 3. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT HE IS NOT PRESSING GROUND NO. 5 AND THE SAME IS DISMISSED AS NOT PRESSED. 4. ASSESSEE IS IN THE BUSINESS OF PROVIDING CREDIT CAR D, SIM CARDS OF MOBILE PHONE. THE RETURN FOR THE YEAR UNDER CONSIDE RATION WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE A.O FOUND THAT ON THE T OTAL GROSS RECEIPT OF RS. 81.78 LACS, ASSESSEE HAS CLAIMED INCENTIVE A ND COMMISSION OF RS. 39.71 LACS. THE A.O FURTHER OBSERVED THAT THOUG H THE COMMISSION DURING THE YEAR UNDER CONSIDERATION HAS FALLEN TO 7 1.16 LACS AS COMPARED WITH THE PREVIOUS YEAR AND YET THE COMMISS ION EXPENSES CONTINUED AT THE LEVEL OF 39.6 LACS . THE A.O FURTH ER OBSERVED THAT AT THE TIME OF SURVEY TOTAL INCENTIVE WAS ONLY RS. 10. 54 LACS TILL 22.01.2002 AND THE SAME JUMPED TO 36.33 LACS MEANIN G THEREBY THAT THE ASSESSEE HAS BOOKED EXPENSES OF RS. 25.79 LACS DURING THE INTERVENING PERIOD FROM 22.01.2002 TO 31.03.2002. 5. SINCE, THE ASSESSEE FAILED TO FURNISH DETAILS OF RE CIPIENT AND THE BASIS OF WORKING THE INCENTIVE, THE A.O DISALLOWED THE EX CESS CLAIM OF INCENTIVE TO THE TUNE OF RS. 25.78 LACS. 6. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD . CIT(A) AND REITERATED ITS CLAIM OF INCENTIVE PAYMENT. AFTER CO NSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) HELD AS UNDER:- IT IS NOTED THAT THE COMMISSION RECEIPTS DECLINED FROM RS. 81.78 LAKH IN F.Y. 2000-01 TO RS. 71.16 LAKH IN F.Y. 2001-02, WHEREAS COMMISSION PAYMENTS ITA NO. 2950 /AHD/2010 . A.Y. 2002- 03 4 REMAINED MORE OR LESS CONSTANT, I.E. RS. 39.6 LAKH IN F.Y. 2001-02 AS AGAINST RS. 39.71 LAKH IN F.Y. 2000-01. IN APPELLANT'S BUSI NESS, THE RATIO COMMISSION/INCENTIVE EXPENSES TO COMMISSION RECEIPT S WOULD MORE OR LESS BE THE SAME OVER THE YEARS. THE RATIO OF COMMISSION /INCENTIVE EXPENSES TO COMMISSION RECEIPTS WORKS OUT TO 44.393% IN A.Y. 20 01-02, AS PER EXPENSES ALLOWED IN THE ASSESSMENT FOR A.Y. 2001-02 AND APPE AL ORDER NO. CAB- IV/397/09-10 DATED 9.8.2010. AS PER THIS RATIO, IN A.Y. 2002-03, COMMISSION EXPENSES SHOULD BE RS. 31,59,321/- I.E. 44.393% OF RS. 71,16,712/-KEEPING THIS IN VIEW, DISALLOWANCE OF RS. 7,00,000/- OUT OF COMMISSION/INCENTIVE EXPENSES IS CONFIRMED AND BALANCE DISALLOWANCE IS C ANCELLED. 7. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE COULD N OT SUBMIT ANY OTHER DETAILS IN SUPPORT OF ITS CLAIM AND THE LD. D .R. STRONGLY RELIED UPON THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT IN THE EARLIER ASSESSMENT YEAR, DISALLOWA NCE OF INCENTIVE TRAVELLED UP TO THE TRIBUNAL AND THE TRIBUNAL IN IT A NO. 2949/AHD/2010 ON PAGE 4 PARA 8 OF ITS ORDER HELD AS UNDER:- 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT ADDITION HAS BEEN MADE BY THE AO BY DISALLOWING 1/1 0 TH OF COMMISSION PAID TO VARIOUS PARTIES BY THE ASSESSEE ON THE GROUND TH AT THERE WAS HUGE INCREASE UNDER THIS HEAD IN COMPARISON TO PROPORTIO NATE EXPENSES ON THIS ACCOUNT IN THE IMMEDIATELY PRECEDING YEAR WITH REFE RENCE TO RECEIPTS OF THE ASSESSEE AND ASSESSEE FAILED TO JUSTIFY THIS INCREA SE. BEFORE LD. CIT(A) ALSO ASSESSEE WAS NOT ABLE TO SATISFY HIM BY WAY OF PROD UCING SUPPORTING EVIDENCE THOUGH LD. CIT(A) GAVE AMPLE OPPORTUNITY F OR DOING THIS. BEFORE US ALSO ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM ANY FURTHER, THEREFORE WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF LD. CIT (A) AND THE SAME IS HEREBY UPHELD. GROUND NO. 1 OF ASSESSEE'S APPEAL IS DISMIS SED. ITA NO. 2950 /AHD/2010 . A.Y. 2002- 03 5 9. SINCE IN THE EARLIER YEAR, DISALLOWANCE OF 1/10 TH OF COMMISSION PAID HAS BEEN UPHELD BY THE TRIBUNAL (SUPRA). CONSI DERING THE SAME IN THE LIGHT OF THE FINDINGS OF THE LD. CIT(A) (SUPRA) , WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS AND THE SAME ARE CONFIRMED. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 10. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O FO UND THAT THE UNSECURED LOANS IN THE BALANCE SHEET HAVE INCREASED FROM 1,88,902/- TO RS. 14,50,153/-. ASSESSEE WAS ASKED TO EXPLAIN T HE ADDITIONAL CASH CREDIT IN THE LIGHT OF THE PROVISIONS OF SECTION 68 . ON RECEIVING NO PLAUSIBLE REPLY, THE A.O ADDED RS. 12,61,251/- AS U NEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 11. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD . CIT(A) AND IN SUPPORT FURNISHED THE DETAILS OF CASH CREDITORS ALONG WITH THE CONFIRMATIONS. THE LD. CIT(A) CALLED FOR A REMAND R EPORT WHICH WAS SUBMITTED BY THE A.O VIDE REPORT DATED 05.08.2010. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE REMAND REPORT OF THE A.O, THE LD. CIT(A) HELD AS UNDER:- 3.2 I HAVE CONSIDERED THE MATTER. AT REMAND STAGE, ASSESSING OFFICER HAS ACCEPTED LOANS FROM THE PARTIES TOTALING RS. 2, 45,137/- AS MENTIONED ABOVE TO BE GENUINE. IN RESPECT OF NARAYA NBHAI MOTIBHAI, APPELLANT COULD NOT FURNISH THE CONFIRMATION AND AD DITION IN RESPECT OF LOAN TAKEN FROM THIS PARTY DURING THE YEAR, I.E. RS .40.000/- IS JUSTIFIED. REGARDING LOANS FROM KUMAR MARKETING SERVICES AND L YNX COMMUNICATION SYSTEMS, APPELLANT HAS FURNISHED THEI R CONFIRMATION AS WELL AS THEIR INCOME-TAX PARTICULARS/COPIES OF INCO ME-TAX RETURNS. THESE ARE EXISTING PARTIES AND LOANS WERE BY ACCOUN T PAYEE CHEQUE WITH NARRATION TO THIS EFFECT APPEARING IN APPELLAN T'S BANK ACCOUNT. ITA NO. 2950 /AHD/2010 . A.Y. 2002- 03 6 ADDITION UNDER SECTION 68 FOR THESE TWO LOANS WOULD NOT BE JUSTIFIED ON THE GROUND THAT APPELLANT COULD NOT FURNISH COPY OF THEIR BANK ACCOUNT. THE DETAILS FURNISHED BY THE APPELLANT WERE SUFFICI ENT FOR DISCHARGING THE ONUS CAST ON IT. REGARDING THE REMAINING ADDITI ON IN RESPECT OF BANK ACCOUNT CREDIT BALANCES, THESE ARE SUMS OWED B Y APPELLANT TO VARIOUS BANKS, I.E. THESE ARE APPELLANT'S OUTSTANDI NG TOWARDS BANK OF BARODA, DENA BANK, ICICI BANK, STANDARD CHARTERED B ANK, SBI ETC. FOR USE OF CREDIT CARDS. THERE CAN BE NO ADDITION U/S 6 8 IN RESPECT OF SUMS OWED BY APPELLANT TO VARIOUS BANKS, WHICH ARE IDENTIFIABLE, CREDITWORTHY AND ASSESSED TO TAX. APPELLANT HAS FUR NISHED COPIES OF RELEVANT EXTRACTS ISSUED BY THESE BANKS EXPLAINING THE NATURE OF BORROWINGS AND ALSO RECONCILIATION BETWEEN THESE EX TRACTS FURNISHED BY THE BANK AND THE BALANCES AS PER APPELLANT'S BALANC E SHEET. REGARDING ASSESSING OFFICER'S OBSERVATION THAT THESE ARE ACCO UNTS IN OTHER PERSONS NAMES, APPELLANT HAS EXPLAINED THAT THESE A RE CREDIT CARD ACCOUNTS IN THE NAMES OF DIRECTORS AND EMPLOYEES OF THE APPELLANT'S COMPANY, SINCE SUCH ACCOUNTS HAVE TO BE IN THE NAME OF INDIVIDUALS AND ALL TRANSACTIONS IN THESE ACCOUNTS ARE RECORDED IN THE BOOKS OF ACCOUNTS SINCE EARLIER YEARS. TO SUM UP, OUT OF ADD ITION OF RS.12,61,251/-, ADDITION OF RS.40,000/- IS CONFIRME D AND BALANCE I.E. RS.12,21,251/- IS DELETED. 12. THUS, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 40,000/- BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE FURNISH ED THE CONFIRMATION OF NARAYANBHAI MOTIBHAI TO JUSTIFY THE CREDIT ENTRY OF RS. 40,000/-. A PERUSAL OF THE CONFIRMATION SHOWS THAT THE LOAN WAS TAKEN BY AN ACCOUNT PAYEE CHEQUE NO. 018485 ON 16.08.2001. EXCE PT FOR THIS, THERE IS NOTHING ON RECORD TO DISCHARGE THE INITIAL ONUS CAST UPON THE ASSESSEE BY THE PROVISIONS OF SECTION 68 OF THE ACT . SINCE THE ASSESSEE ITA NO. 2950 /AHD/2010 . A.Y. 2002- 03 7 HAS FAILED TO DISCHARGE THE INITIAL ONUS, WE DECLIN E TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 2 IS ACCORDI NGLY DISMISSED. 13. SINCE WE HAVE CONFIRMED THE FINDINGS OF THE LD. CIT (A) IN SO FAR AS THE ADDITION OF RS. 40,000/- IS CONCERNED, GROUN D NO. 3 IS CONSEQUENTIAL AND ACCORDINGLY THE INTEREST PAID ON THE AFOREMENTIONED AMOUNT IS ALSO DISALLOWED. GROUND NO. 3 IS ALSO DI SMISSED. 14. ON FURTHER PROBE OF THE ACCOUNTS OF THE ASSESSEE QU A THE NOTINGS ON PAGE 32 & 33 OF ANNEXURE A-13 FOUND DURING THE C OURSE OF SURVEY PROCEEDINGS, THE DIRECTOR OF THE ASSESSEE COMPANY W AS ASKED TO EXPLAIN THE ENTRIES. IT WAS EXPLAINED THAT THE ENTR IES WERE QUOTATIONS FOR RELATIVES FOR FOREIGN TRAVELLING FROM COX AND K INGS, RS. 1,01,000/- WAS PAID BY CHEQUE AND RS. 10,000/- IN CASH. THE A. O SIMPLY REJECTED THE CLAIM OF THE ASSESSEE AND MADE AN ADDITION OF R S. 1,11,000/- AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT. 15. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASS ESSEE STATED THAT THE IMPUGNED AMOUNT WAS NEVER CLAIMED AS EXPENSES AND T HE SAME WAS REFLECTED IN THE BALANCE SHEET UNDER THE HEAD LOANS AND ADVANCES TO COX & KINGS (INDIA) LTD. 16. WE FIND FORCE IN THIS CONTENTION OF THE LD. COUNSEL . WE HAVE CAREFULLY PERUSED THE BALANCE SHEET OF THE ASSESSEE AT PAGE 15 OF THE PAPER BOOK. DETAILS OF LOANS AND ADVANCES (ASSET) A RE GIVEN WHEREIN RS. 1,01,000/- HAS BEEN SHOWN AS ADVANCES TO COX & KINGS. SINCE THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE ON THIS CO UNT, WE DO NOT FIND ANY REASON FOR THE ADDITION MADE U/S. 69C OF T HE ACT. WE ITA NO. 2950 /AHD/2010 . A.Y. 2002- 03 8 ACCORDINGLY REVERSE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO DELETE THE ADDITION OF RS. 1,11,000/-. GROUND NO. 4 IS ACCORDINGLY ALLOWED. 17. GROUND NO. 6 RELATES TO THE DISALLOWANCE OF RS. 1,4 0,815/- WHICH RELATES TO THE LOOSE PAPERS INVENTORISED DURING THE COURSE OF SURVEY AND ON PAGE 10 TO 14 OF ANNEXURE A-14 CONSTRUCTION DETAILS WERE MENTIONED. WHEN THE DIRECTOR OF THE ASSESSEE WAS CO NFRONTED WITH THIS, HE ADMITTED THAT RS. 52,065/- WAS FURNITURE O F HIS HOUSE AND RS. 88,750/- WAS FOR POLISHING. AS NO SOURCE WAS EXPLAI NED, THE A.O ADDED RS. 1,40,815/- AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT. 18. WHEN THE MATTER WAS AGITATED BEFORE THE LD. CIT(A), THE LD. CIT(A) AT PARA 7.1 OF HIS ORDER OBSERVED THAT NO SU BMISSIONS WERE MADE REGARDING THIS GROUND OF APPEAL AND SINCE THE ASSESSEE HAS FAILED TO EXPLAIN SOURCE OF EXPENDITURE, ADDITION O F RS. 1,40,815/- WAS CONFIRMED. 19. BEFORE US ALSO, THE LD. COUNSEL COULD NOT PRODUCE A NY EVIDENCE IN SUPPORT OF HIS CLAIM. MOREOVER, A PERUSAL OF THE FI XED ASSETS SCHEDULE IN THE BALANCE SHEET EXHIBITED AT PAGE 9 OF THE PAP ER BOOK SHOWS THAT THERE IS AN ADDITION OF RS. 56,346/- UNDER THE BLOC K OF FURNITURE. BY PREPONDERANCE OF PROBABILITIES, THE PRESUMPTION IS AGAINST THE ASSESSEE, THEREFORE, WE DECLINE TO INTERFERE WITH T HE FINDINGS OF THE LD. CIT(A). GROUND NO. 6 IS ACCORDINGLY ALLOWED. ITA NO. 2950 /AHD/2010 . A.Y. 2002- 03 9 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12 - 05 - 20 16. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD